The Financial Accounting Standards Board is aiming to clarify the interaction between two of its accounting standards: the standard on recognition and measurement of financial instruments and the standard on equity method investments.

FASB issued a proposed accounting standards update Tuesday after hearing questions from some of its stakeholders about how the two standards worked together. In 2016, FASB issued Accounting Standards Update No. 2016-01, “Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities,” which added Topic 321, “Investments — Equity Securities.” That addition made some targeted improvements to deal with certain aspects of accounting for financial instruments.

The proposed update comes from questions about the interaction of Topic 321 and Topic 323, “Investments — Equity Method and Joint Ventures.” It would clarify that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323 for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

The proposed ASU also offers guidance on some of the questions FASB received about how to apply the guidance in Topic 815, “Derivatives and Hedging,” for certain forward contracts and purchased options to buy securities that, upon settlement or exercise, would be accounted for under the equity method of accounting. The proposed amendments are supposed to reduce differences in practice and increase the comparability of the accounting for the interactions.

FASB is asking for comments on the proposal by Aug. 29.

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